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Unsecured creditors suspect that Hostess Brands Inc. may have "manipulated" its executives' pay--sending its former chief executive's salary, in particular, skyrocketing- in the months leading up to its Chapter 11 filing, in an effort to dodge the Bankruptcy Code's compensation requirements, according to a redacted court filing reviewed by Dow Jones.

The official committee representing Hostess's unsecured creditors wants to launch a formal investigation in the bankruptcy case, hoping to dig deeper into the bakery company's senior executive compensation. The information the group has already gathered suggests "the possibility" that the company converted a chunk of its top executives' pay from performance-based bonuses to guaranteed salary, "at least in part to sidestep" rules designed to ensure that companies in bankruptcy aren't enticing their employees to stay on board with the promise of cash.

The Teamsters are understandably furious. Hostess' top managers demanded 7,500 Teamster employees accept drastic wage and benefit cuts after they raised their own pay by as much as 300 percent.

The Dow Jones article suggests that management broke the law, looted the company and then told workers to suck it up and sacrifice.

If this is true, Hostess executives have violated their agreement with the Teamsters that all parties, including management, would share equally in concessions that would help keep this company alive.

It would be outrageous for the board of directors, which included secured lenders, to approve executive salary increases of up to 300 percent for a company that has filed for bankruptcy twice in four years.

Hostess management would like you to believe the company is failing because union workers make too much money and enjoy benefits that are too rich. In another era it would be hard to believe that executives driving a company into bankruptcy would make such a brazen claim. Especially since former CEO Brian Driscoll's salaray rose from $750,000 to $2.55 million in the run-up to bankruptcy -- and other executives' pay rose by as much as 80 percent.

But this is the age of corporate greed. It is now the norm rather than the exception for CEOs to put their own greed ahead of the interests of the company they've been entrusted to run.

CEOs are looting their corporations at the expense of innovation, trainng and employment, writes William Lazonick, the director of the UMass Center for Industrial Competitiveness.

In other words, they're destroying the US economy.

It isn't their base salary that's an issue here, but their stock options. For example, Bank of America's CEO Brian Moynihan's salary was "only" $950,000 last year, but he got stock options worth $6.1 million. JPMorgan Chase's Jamie Dimon did much better, earning $1.5 million in base salary with stock options that could raise his pay package to $23 million.

So CEOs have an incentive to inflate the price of their company's stock. They do it by buying back the company's own shares (called a stock buyback), which raises the share price. And as Lazonick points out, the practice of stock buybacks has gotten out of control:

In 1981, 292 major corporations spent less than 3 percent of their combined net income on buybacks. ... From 2003 to 2007, buybacks really took off, and by 2007 the very same 292 corporations now spent over 82 percent of their net income repurchasing their own stock.

Here's why that's bad:

...these executives will tend to ignore investments in innovation and training. Some companies actually fund their buybacks by laying off workers, offshoring jobs to low-wage countries, and taking on debt. The top executives’ weapon of value extraction becomes a weapon of value destruction.

Lazonick argues that the 1% are destroying their companies and destroying the economy.

RuralRoute, a retired Hostess employee and Teamster, wrote a diary a few months back that exposed just how Hostess's well-compensated management destroyed the venerable snack maker:

Bankruptcy number one was filed in the fall of 2004 for no good reason. Interstate had assets galore and was current on it's liabilities- I pulled up a bunch of their property tax records then and found that they were not only current, but in fact had paid property taxes six months and more early. The nearly five year long bankruptcy produced little improvements in efficiency, only wage and benefit concessions. And despite having just expanded the corporate offices in Kansas City, on emerging from bankruptcy number one the executives changed the company's name to Hostess Brands and leased some pricey office space in more fashionable Houston.

Hostess has been coercing further concessions around a year now, and the union's membership have rightly rebuked them. Several months ago Hostess quit making contractually and legally obligated payments to the pension plans completely. Having failed to intimidate their union workers, Hostess has filed for bankruptcy, again. Our pensions are threatened, while the company's retired executives relax in the wealthier suburbs of Kansas City and other environments... You can look up their swank addresses and maxed out contributions to the republicans at opensecrets.org.

One bankruptcy is... Enough!

This retired Teamster Hostess worker and her brothers and sisters have had enough of "convenience" bankruptcies. It's time for the bankruptcy courts to say "No" and tell Hostess and similar deadbeat corporations to end the shakedown of their workers and pay up, even if it requires a "clawback" of those millions in unearned executive bonuses. Greedy CEO's will fleece us again and again... Until we stop them!...

Update- Just started reading through the bankruptcy filings... Juicy! For example, despite having hordes of empty bakeries and other buildings they've closed, Hostess is spending over $100,000 a month just to warehouse incoming ingredients. And in little Waterloo, Iowa their operation looks to be spread out over five locations- a bakery, thrift stores, and a depot and a warehouse because the bakery isn't big enough now that they've closed the Davenport, Rochester, Sioux City, Omaha, and Minneapolis bakeries. Meanwhile, the closed bakery in Davenport sits largely empty while Hostess is renting depot space just a few miles away. And Hostess is blaming the workers for their problems?

The company's unsecured creditors' committee, which includes the Teamsters, is asking the judge to order a formal investigation into management's potential violation of bankruptcy law. You see, you're not supposed to be looting your company before you stiff your creditors and your workers.

It never ceases to amaze me when people defend multi-million dollar "bonuses" for people who are running companies into bankruptcy. Meanwhile telling people who were hired and worked there for 20 years on the promise of a pension, that their pension is gone. It seems that to some people, the top people are NOT being greedy to expect 10-20 million dollar salaries when a company is threatening bankruptcy, but workers who have made agreements to take pay cuts in order to save a business in several contracts are suddenly "greedy" when they refuse yet ANOTHER cut. Possibly a cut that will put them out of their house, or push them on to assistance, or whatever.

Where's the consistency? Is making big money the only guarantee for conservatives to say you are NOT being greedy? Is it more important for a business to relocate offices to a more expensive place than it is to find some efficiencies?

so they made the dive because their pay checks were on the line and rather than attempt to salvage the company planned an exit strategy to give themselves a beautiful pay day...now that is corporate greed on a new level.

so they made the dive because their pay checks were on the line and rather than attempt to salvage the company planned an exit strategy to give themselves a beautiful pay day...now that is corporate greed on a new level.

I just saw an interview on our local news station of a woman working in a Hostess outlet store; she worked for Hostess for 42 years. I was wondering (and our brilliant local journalist didn't ask) if she gets any retirement benefits from the company for her loyalty. After all, they will be selling everything hostess...or, forgive my ignorance, is that money required to do something specific because of the bankruptcy?

Quoting stacymomof2:

It never ceases to amaze me when people defend multi-million dollar "bonuses" for people who are running companies into bankruptcy. Meanwhile telling people who were hired and worked there for 20 years on the promise of a pension, that their pension is gone. It seems that to some people, the top people are NOT being greedy to expect 10-20 million dollar salaries when a company is threatening bankruptcy, but workers who have made agreements to take pay cuts in order to save a business in several contracts are suddenly "greedy" when they refuse yet ANOTHER cut. Possibly a cut that will put them out of their house, or push them on to assistance, or whatever.

Where's the consistency? Is making big money the only guarantee for conservatives to say you are NOT being greedy? Is it more important for a business to relocate offices to a more expensive place than it is to find some efficiencies?

So glad someone else sees what I see. Here's what I posted in another thread about this exact thing. But, I was bashed and yelled at that unions are outdated and greedy. JSMDH.

Seems people don't understand that these people hold out for more money becuase they have been held to contract rates and probably haven't had raises in years! Cost of living keeps going up while employees' pay is frozen.

My fiance has been going through this with American Airlines for the last 6 years! He hasn't gotten a raise in over 10 years because of the union contract of 2001. The employees agreed to lesser wage increases, fewer holidays, sick pay cut in half and no length-of-service vacation increases.

They did all that to help keep the company above water. Their contract ended in 2006. Negotiations were at a stalemate for 5 years when the company filed for bankruptcy in Nov. 2011. During bankruptcy court, it was discovered that over the course of those years, the CEOs continued to receive their $500M bonues and profit sharing REGULARLY. It was also disclosed that the company owns nearly $100M in party mansion throughout the world, claimed to be used for "international business". LMAO.

All the while, the employees who keep the company going, were drowning in the economy where cost of living kept rising disproportionately to their pay.

You see, the top dogs really couldn't care less if the company goes bankrupt or not. The "fat cats" have their pockets lined and their "futures" secured. If you have doubts about this, just look up Tom Horton. Do a little research and you will learn just how many companies he was hired to take into bankruptcy. He is know as the "closer" in the business world.

So, yes, I stand behind the blue collar workers who stand up for what is right and good. At times, I think our country should learn by example. Our country is a country divided. If it worked more as a union, we would see better results.

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